ArcelorMittal's Rs 40,000-cr project put on hold for 2 yrs

July 15, 2009 10:58 IST

The world's largest steel maker, ArcelorMittal, has put on hold its proposed Rs 40,000-crore (Rs 400-billion) steel plant in Orissa's Keonjhar district for at least two years, as the global demand for steel is stagnating.

However, the company will go ahead with its plans in Jharkhand, and has secured iron ore mines and coal linkages to the project, company sources told Business Standard.

An e-mail reply from the steel major said it was not expecting its projects in India to start before 2014.

"We have paused our growth projects at present for obvious reasons. The projects in India are greenfield ones that have considerable lead time, as they involve land acquisition, environmental concerns, etc. But we remain committed to our investment in India," said the e-mailed reply.

The London-based company was planning to start construction of the Orissa and Jharkand projects -the company's only new steel plants globally, each with a proposed yearly capacity of 12 million tonnes - by the end of this year, with a commissioning deadline of 2014.

The projects were announced in 2005-end, a time when global economy was sound and demand for steel was bright.

A source said apart from the dwindling demand for steel, land acquisition has been a major hindrance for progress of the project in Orissa. The project requires about 8,000 acres in the tribal Patna tehsil in Keonjhar district.

Tribals, with the support of activists, were opposing the project. The steel major also faced tribal opposition for its Jharkhand project.

Sources said the Orissa government could mobilise only about 1,500 acres and the company had also delayed payment for the acquired land, giving an indication to the state government that it was going slow on the project. The company finalised the detailed project report for the Orissa project only by the end of 2008.

Sources said the delay in projects would cause capital escalation by about 50 per cent. The company will have to spend an additional $9 billion for completion of the projects, due to the delay, a Credit Suisse report had estimated.

South Korean steel maker Posco's $11.6 billion Orissa project is also facing regulatory hurdles, along with issues of land acquisition. Tata Steel's new projects in Jharkhand, Orissa and Chhattisgarh have been delayed by two to three years due to land acquisition problems and other issues.